Environmental Protection
Why is environmental protection in the energy sector important?
104. The Government's policy
is to promote sustainable development and protect the environment;[229]
a policy which we wholeheartedly support. The UK has various
international commitments to reach certain environmental standards,
such as that under the Framework Convention on Climate Change
to stabilise CO2 emissions at 1990 levels by 2000,
and to protect habitats and species. As the Royal Society for
the Protection of Birds pointed out, the energy sector can have
"a range of adverse impacts on the environment and biodiversity".[230]
These can range from the effects on sites, habitats and species
of siting new plant, gas pipes or transmission wires to the effects
of emissions causing climate change and the acidification of rain.
Therefore, it is important that the energy sector achieves high
environmental standards. The Environment Agency set out its duties
in respect of environmental protection, and its objective of ensuring
that the environmental effects of different energy sources are
taken into account. It is generally considered that the most
cost-effective way to counteract these negative effects is through
improvements in energy efficiency.[231]
The Agency also pointed out that improvements to energy efficiency
will not by themselves address the key issue of the compatibility
of competition and sustainability raised with us in the Environment
Agency's submission. That is why we recommend that further
consideration is given by the Government to establishing an appropriate
framework within which sustainability can be achieved, and which
would allow the Environment Agency to operate on the basis of
an integrated approach in its dealings with the regulators.
Who has responsibility for environmental regulation in the gas and electricity industries?
105. Legislation gives both
of the energy regulators certain specific environmental responsibilities.
The DGES has, under the terms of the 1989 Electricity Act, a
responsibility to exercise the functions assigned to him in a
manner that will "promote ... the efficient use of electricity
supplied to customers" and to "to take into account,
in exercising those functions, the effect on the physical environment".[232]
Under clause 41 of the same Act, the DGES may "determine
such standards of performance in connection with the promotion
of the efficient use of electricity by consumers as, in his opinion,
ought to be achieved by suppliers".[233]
These duties are nominally shared with the Secretary of State
but at present are exercised solely by the regulator.
106. The DGGS has similar,
although not identical, statutory duties. The Gas Acts state
that the DGGS should, in carrying out her duties, "promote
... the efficient use of gas supplied through pipes" and
"take into account ... the effect on the environment (whether
by way of pollution or otherwise) of activities connected with
the conveyance of gas through pipes".[234]
In 1992, the Competition and Service (Utilities) Act gave the
DGGS the power to "determine such standards of performance
in connection with the promotion of the efficient use of gas by
consumers as, in his opinion, ought to be achieved by public gas
suppliers".[235]
Like the DGES, the DGGS nominally shares her environmental duties
with the Secretary of State.
107. The Directors General
do not have primary responsibility, however, for environmental
regulation in their respective industries. To a large degree,
such responsibility falls to the Department of Environment, the
Environment Agency and where appropriate to other government departments.
The Environment Agency is "clearly the body which, other
than in relation to land planning use, is principally responsible
for the environmental regulation of the electricity and gas supply
industries".[236]
Local Authorities also have a remit in the environmental regulation
of gas and electricity, especially in regard to land use planning;[237]
and some statutory environmental responsibilities rest with the
industries directly.[238]
Who should have responsibility for environmental regulation in the gas and electricity industries?
108. While we accept that
the Environment Agency has overall responsibility for environmental
regulation in the energy industries, we are not surprised to find
there is a degree of confusion and a fear that, with so many bodies
responsible, no one institution is prepared to take the lead.
The UK Round Table on Sustainable Development told us that "there
has been a little bit of passing the parcel"[239]
and compared the allocation of environmental responsibilities
to a merry-go-round.[240]
Such concerns led some witnesses to argue for an increased environmental
role for the Directors General. For instance, the World Wildlife
Fund called for equal weight to be given to the regulators' economic,
environmental and social goals;[241]
the Royal Society for the Protection of Birds favoured extending
the remit of the regulators' environmental duties,[242]
and the UK Round Table on Sustainable Development suggested that
"clear environmental objectives" should be set by the
Government for the regulators.[243]
Others, such as the Association for the Conservation of Energy,
suggested that the regulators already had sufficient duties and
powers to take the initiative on environmental matters and that
"all that is lacking is the will to do so".[244]
109. Such arguments are
rejected by the gas and electricity regulators and several in
the industries. The EIUG, for instance, believe that the regulator
should make his decisions based on economic factors[245]
and PowerGen told us that the present system "works very
successfully" and that it had led to "dramatic improvements".[246]
The DTI, for its part, told us that "it is not for Ministers
to set particular objectives" for the regulators.[247]
Both the Directors General saw their roles to be mainly concerned
with economic regulation.[248]
Indeed, the DGGS went further saying that, as regulators are
independent of Parliament, "as soon as we start getting involved
in other forms of regulation, whether it is income control, through
directors' pay, or increasing taxes on energy for carbon emissions,
for example, we are really starting to usurp the role of Parliament".[249]
Other witnesses, such as the NGC, supported the DGGS, arguing
that it was for Government, and not for the regulators, to adopt
a stronger stance on environmental considerations.[250]
110. We are concerned that
confusion should have arisen and are keen that it should be dispelled
but we do not accept that there is a need for extending or strengthening
the environment role of the energy regulators. As we have already
indicated, powers already exist to require the regulators to operate
within a regime which addresses environmental concerns, and this
they should now be required to do. Similarly, it is important
that Government Ministers and other agencies are permitted to
influence the environmental regulatory regime where it is appropriate,
as in planning applications for instance. We have heard no argument
strong enough to convince us that it necessary to duplicate the
resources of the Environment Agency in both OFFER and OFGAS and
agree with the EIUG such action could serve "to muddle the
situation further".[251]
Nevertheless, it is important that the respective roles of OFFER,
OFGAS, the Environment Agency and other bodies are clearly and
widely understood. To that end, we recommend that the Government
annually publish and disseminate a clear statement defining the
environmental regulatory responsibilities of each Government department
and each agency involved and include in such statements a report
on progress made towards meeting its internationally agreed obligations.
These statements should be subject to appropriate regular parliamentary
scrutiny.
Co-operation and co-ordination
111. The Environment Agency,
while it accepts that it has lead responsibility for environmental
regulation in the energy sector, stated that "it would not
normally be appropriate for the economic regulators to seek to
duplicate the Agency's environmental regulation ... by environmental
conditions in licences".[252]
It also envisages the economic regulators taking action in support
of its objectives where it has no powers to act for itself.[253]
If this sort of inter-agency approach to environmental regulation
is to be successful (and the possibility of conflicting action
is to be avoided) it is essential that there is close co-operation
and co-ordination between the Environment Agency and OFFER and
OFGAS.[254]
112. There have been some
discussions between the Environment Agency and the economic regulators
but "to date contact between the Agency and the economic
regulators has been limited".[255]
The Environment Agency has also put OFFER and OFGAS on its mailing
list to ensure that documents, such as the Government's recent
White Paper on Sustainable Development, reach them. This relationship
seems too limited, passive, and ad hoc to ensure that the regulatory
offices and the Environment Agency work in concert on all aspects
of environmental protection.
113. The Environment Agency
told us that their relationships with the economic regulatory
offices was currently being reviewed and that further contacts
were planned, especially in relation to sustainable development.[256]
We welcome these developments but we are not convinced that they
are sufficient. We recommend that the Environment Agency and
the energy regulators, in the course of reviewing their relationships,
consider establishing a systematic mechanism for ensuring regular
contact and discussions designed to ensure that all agencies and
other parties involved in the environmental regulation of the
energy sector work effectively and in concert and that the operation
of such mechanism be the subject of an annual report to Parliament.
Exercise of statutory functions regarding environmental regulation
114. It is important that
both the Environment Agency and the economic regulators exercise
their respective environmental duties with vigour. It is beyond
the scope of this inquiry, and indeed beyond the remit of this
Committee, to examine the work of the Environment Agency although
we were disappointed to find that, according to the Association
for the Conservation of Energy, "to date the Environment
Agency has not got frightfully involved with energy issues".[257]
229 Mem. p.4. Back
230 Mem.
p.72. Back
231 Mem.
p.74. Back
232 Electricity
Act 1989, clause 3. Back
233 Electricity
Act 1989, clause 41. Back
234 Gas
Act 1986, Section 4; Gas Act 1995, Section 1. Back
235 Gas
Act 1986, as amended by the Competition and Service (Utilities)
Act 1992. Back
236 Mem.
p.9. Back
237 Mem.
p.8. Back
238 Mem.
p.9. Back
239 Q.
542. Back
240 Q.
563. Back
241 Mem.
p.79. Back
242 Mem.
p.72. Back
243 Q.
551. Back
244 Ev.
p.168. Back
245 Ev.
p.111. Back
246 Q.
157. Back
247 Ev.
p.325. Back
248 QQ.1047,
867. Back
249 Q.
867. Back
250 Q.
194. Back
251 Ev.
p.111. Back
252 Ev.
p.9. Back
253 Ibid. Back
254 Ev.
p.111. Back
255 Mem.
p.9. Back
256 Ibid. Back
257 Q.
573. Back
